No need (yet) to work overtime on overtime rules

 
 
Updated 6/6/2016 8:38 AM

You could be working overtime to figure out the best approach to the new overtime rules, except it's likely too soon for that type of stress.

The better approach right now may be to relax, kick back and take a deep breath or two.

                                                                                                                                                                                                                       
 

At least that's pretty much the advice from Ruth Kronvold, a staff accountant at GLM Inc., a Schaumburg accounting firm that focuses on small and medium-sized businesses.

"There's no need to panic," Kronvold begins. Rather than succumb to the "reality show focus" that problems must be solved instantly, Kronvold suggests "A pause. These are big changes, but you have time to get things done."

At the same time, she adds, "You shouldn't wait until October" to develop a strategy to deal with the new overtime rules.

There is legitimate concern. The Department of Labor's new overtime rules, effective December 1, may change your staffing and almost certainly will impact your balance sheet.

The biggest change is that the annual salary threshold for exempt employees -- those you do not have to pay overtime even though they may work more than 40 hours per week -- jumps to $47,476.

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The current exempt salary level is $23,660.

That increase, which has no phase-in, obviously means there are serious decisions to make: Salary levels, salary vs. hourly status, and, in many situations, employee head count.

"Feedback?" Kronvold replies to a question. "Business owners are in shock and dismay. Labor will cost more and prices will have to go up -- or people will be required to work fewer hours (and likely have smaller paychecks as a result)" as businesses seek to keep payroll costs in line.

Some situations will be tougher than others. Here is how Kronvold suggests business owners might approach the overtime rule decisions they will have to make.

• First, be aware, Kronvold says, that you can ignore people who are above the new salary threshold.

• Then review your payroll data. Your accountant should be able to help. So should a payroll service if you use one.

                                                                                                                                                                                                                       
 

"Ask yourself, 'How many exempt people do I have under the current guidelines?'" Kronvold says. "Who are they? Where do they really fall, under both the new and old guidelines?

"Should I move their pay level up or down?"

• You may need some good HR advice, because employee personal status issues may come to the fore.

For example, employees who currently draw a salary and are exempt from overtime pay may, depending on your decisions, find themselves on an hourly pay scale.

"Many employees feel they're 'a step above' hourly workers," Kronvold says.

If, because of the new overtime rules they revert to hourly status, or if under the new rules they now must work 50 hours every week -- and keep track -- or their pay will take a hit, you may have a morale problem.

Remember the deep breaths.

• © 2016 Kendall Communications Inc. Follow Jim Kendall on LinkedIn and Twitter. Write him at Jim@kendallcom.com. Listen to Jim's Business Owners' Pod Talk at www.kendallcom.com/podcast.

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